CSBS Examiner

A weekly report of events affecting the state banking system from the Conference of State Bank Supervisors

7/1/2005

In This Issue...

Upcoming Events...

"As a rule man is a fool, when it’s hot he wants it cool, when it’s cool he wants it hot, always wanting what is not." -- Anonymous

Summer is in full swing in our nation’s capital, with temperatures and humidity creeping ever higher. In these dog days of summer, it’s all too easy to forget the bitter cold and record-setting snows of winter which had us wishing for sunny summer days.

CSBS Chairman John Ducrest Bids Farewell to FDIC Chairman Sheila Bair

Today is Sheila Bair’s last day as Chairman of the Federal Deposit Insurance Corporation. Below is an opinion piece authored by CSBS chairman and Louisiana commissioner John Ducrest which was published in American Banker last week.

Bair Led by Listening

[Today], Sheila Bair will step down as chairman of the Federal Deposit Insurance Corporation. She was a tireless player in the government's efforts to stabilize the banking industry, ensuring stability measures were made available to institutions of all sizes. In her final year in office, she has worked to ensure meaningful implementation of the provisions of the Dodd-Frank Act to provide a more stable and prosperous financial system, with a constant eye on the impact the regulation will have on the future of community banking.

In my years as a state bank regulator and in my current tenure as Conference of State Bank Supervisors chairman, I have had the opportunity to work closely with Chairman Bair on a variety of supervisory issues. In fact, one of her first trips as chairman was to New Orleans to witness firsthand the devastation caused by hurricane Katrina and to understand the issues and challenges facing the institutions impacted by the storm. I have come to know her as a trusted colleague and as a pragmatic regulator who is passionate not only about protecting consumers, but also about ensuring the ongoing success of the community banking system.

Perhaps more than any other federal regulator in this time of uncertainty and crisis, she has pursued initiatives to end "too big to fail" and ensure the long-term health of our entire financial system, and has demonstrated a willingness to listen to the voices of those who reside in areas outside of the confines of Washington, D.C.

Under Chairman Bair's leadership, the FDIC implemented the Temporary Liquidity Guarantee Program, which in my estimation, did more than any other government program to stabilize the banking industry and enhance public confidence.

As the economic environment became challenging and banks began to fail, the FDIC's loss-sharing provisions did much to ensure community banks were able to purchase failed banks. This allowed the community banking system to heal itself as the system was designed.

Chairman Bair has vigorously embraced mandates put forth by the Dodd-Frank Act that will hopefully end the "too big to fail" problem by providing the FDIC with tools to conduct an orderly resolution of an institution, regardless of its size or complexity. By requiring the largest institutions to have a resolution plan, or a "living will," and by providing a mechanism for the appointment of the FDIC as receiver of a failing institution, it is my hope that no taxpayers will ever again be called upon to bail out a financial institution in times of crisis.

Her dedicated implementation of Dodd-Frank gives me confidence that the FDIC will be prepared to perform an orderly resolution if necessary. The FDIC's insightful and thoughtful report on how such a resolution of Lehman Brothers would have occurred is certainly encouraging and worth a read.

During her tenure, she has also remained committed to receiving input from interested parties or shareholders from outside of the Beltway. By forming the Advisory Committee on Systemic Resolution and the Advisory Committee on Community Banking, Chairman Bair has created a forum for the FDIC to receive insight and information from a variety of sources. Further, the FDIC has hosted an array of roundtables and symposiums on supervisory issues that impact the financial system and its supervision. Topics covered in these roundtables and forums include deposit insurance assessments, brokered deposits, and the potential for a future bubble in agriculture.

Such commitment to receiving varied opinions on multiple issues perfectly illustrates her dedication to finding solutions to problems that work for the financial system as a whole, not just a narrow market segment with a powerful and well-funded lobby.

The relationship between state regulators and the FDIC is a special one. We are supervisory partners and work hand-in-hand on a daily basis. I commend her for her steadfast focus on the long-term health and success of the financial system as a whole. During her tenure, FDIC observed its 75th anniversary. Her strong and vigorous leadership has resulted in the FDIC being viewed as a leader during the crisis. Chairman Bair, congratulations on completing such a successful tenure as chairman, which has been characterized by your unwavering commitment and resolve, even in the face of unprecedented challenges.

President Obama Announces Intent to Nominate Tom Curry to Comptroller

President Barack Obama has announced his intent to nominate Thomas J. Curry, currently a member of the Board of Directors of the FDIC, to serve as Comptroller of the Currency. Curry has served on the FDIC Board since 2004, and is also chairman of the NeighborWorks American Board of Directors.

Prior to joining the FDIC, Curry was commissioner of the Massachusetts Division of Banks from 1990-1001 and from 1995-2003. He rose through the ranks with the Division, also serving as acting commissioner, first deputy commissioner, and assistant general counsel before being appointed commissioner. He served as the chairman of CSBS from 2000 to 2001 and also served two terms on the State Liaison Committee of the Federal Financial Institutions Examination Council. If confirmed, Curry would be the first former state regulator to be Comptroller since former New York superintendent John G. Heimann served as Comptroller from 1977 to 1981.

If nominated by President Obama, Curry will be subject to Senate confirmation. Following the White House release, Senate Banking Committee chairman Tim Johnson (D-SD) issued a public statement in which he called Curry a "strong, effective director for the FDIC." Johnson continued, "In the aftermath of the financial crisis, it is important to have a Senate confirmed Comptroller in place, and I plan to move his nomination forward in the Banking Committee as quickly as possible."

Around the States

D.C.: The Washington, D.C. Department of Insurance, Securities and Banking (DISB) recently signed a consent order requiring JP Morgan Chase & Co. to complete or confirm to DISB its offer to repurchase auction-rate securities (ARS) from D.C. clients to settle allegations that the company’s securities dealers misled investors about the safety of the ARS market. "JP Morgan Chase is responsible for selling auction-rate securities to District of Columbia investors without full disclosure of the risks involved," said DISB Commissioner William P. White. "This action is being taken to make it clear that financial-services companies will be held accountable for activities that result in unnecessary financial hardship for any District consumer." The order requires JP Morgan Chase to pay a fine to D.C. which represents the District’s pro-rate share of a $25,000,000 settlement negotiated by a multi-state task force of state regulators. Read more here.

Around the Agencies

INTERAGENCY: The Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision have issued guidance to help ensure banking organizations practice effective counterparty credit risk (CCR) management. The guidance is intended primarily for use by organizations with large derivatives portfolios and for supervisors as they examine such institutions’ CCR management. Read more here.

INTERAGENCY: The Federal Reserve Board and the Federal Trade Commission issued final rules to implement the credit score disclosure requirements of the Dodd-Frank Act. The statute requires creditors to disclose credit scores and related information to consumers in notices under the Fair Credit Reporting Act if a credit score is used in setting material terms of credit or in taking adverse action. The final rules issued by the FRB and the FTC amend Regulation V to revise the content requirements for risk-based pricing notices and to add related model forms that reflect the new requirements. The final rules also amend some model notices in Regulation B, which combine the adverse action notice requirements. Read more here.

INTERAGENCY: The Consumer Financial Protection Bureau (CFPB) and the Judge Advocate Generals of the U.S. military branches have issued a Joint Statement of Principles to provide stronger protections for servicemembers and their families from unlawful acts and practices in connection with consumer financial products and services. The CFPB and the Judge Advocate Generals will work together to identify potential violations of federal consumer financial laws and establish a single point of contact within the CFPB’s Enforcement Division to facilitate the sharing of information on consumer complaints from servicemembers and their families. Read more here.

OCC: The Office of the Comptroller of the Currency (OCC) has extended the comment period on proposed guidance for deposit-related consumer credit products. The deadline has been extended 30 days to August 7, 2011. The proposal addresses concerns related to product disclosure and enrollment; legal compliance; program availability and prudent eligibility standards; limitations on product costs and usage; ongoing monitoring and risk assessment; and management oversight. Read more here.

TREASURY: The U.S. Department of Treasury has announced that all of the Troubled Asset Relief Program (TARP) funds invested in Marshall and Ilsley Corporation have been returned to taxpayers. Taxpayers have now recovered approximately $255 billion from TARP’s programs, which exceeds Treasury’s original financial support made through those programs by approximately $10 billion. Read more here

Around the District

CSBS chairman and Louisiana commissioner John Ducrest was in Washington, D.C. last week and met with Acting Comptroller of the Currency John Walsh at the OCC. In the picture below, the two regulators are holding a photo of a 1910 meeting of CSBS hosted by the OCC at the Treasury Department, when the organization’s name was the National Association of State Bank Supervisors. OCC staff found the picture recently while going through their archives and had the photo framed and presented to chairman Ducrest.

Photo Credit: Ron White.

Upcoming Events

July 13: The Insurance, Housing and Community Opportunity Subcommittee of the House Financial Services Committee is holding a hearing at 2:00 pm titled "Mortgage Origination: The Impact of Recent Changes on Homeowners and Businesses." Maryland deputy commissioner Anne Balcer Norton will testify on behalf of CSBS.

July 13 and 14: Federal Reserve Board chairman Ben Bernanke will testify before the Senate Banking Committee and House Financial Services Committee to give his semiannual update to Congress on monetary policy and the state of the economy.

July 14: The Oversight and Investigations Subcommittee of the House Financial Services Committee is holding a hearing titled "Oversight of the Office of Financial Research and the Financial Stability Oversight Council."

Closing Comment

"There’s some sense that the regulatory process should be closed and opaque and secretive and if we have disagreements we need to hide them and we shouldn’t let people know what we’re really thinking. I don’t buy any of that." -- FDIC Chairman Sheila Bair in an interview with American Banker.